Gold prices are on track for their biggest increase of all time

Over the past two weeks, gold has seen strong buying power as investors want to hold more gold to wait for price fluctuations amid geopolitical tensions that show no signs of abating.

This safe-haven demand has pushed gold prices to a three-month high. December gold futures last traded at $2,008.90 an ounce, up 1.4% on the day. Gold has gained about 4% over the past week.

While gold's return above $2,000 an ounce is impressive, it's not surprising that the negative sentiment is taking hold, according to Phillip Streible, chief market strategist at Blue Line Futures.

David Morrison, senior market analyst at Trade Nation, said gold prices are accurately reflecting crisis-era investor sentiment.

“Gold has broken through all the major resistance levels at $1,900, $1,950 and $1,980, and I think the market wants to see $2,000. It’s a little early to tell, but this could be the rally that takes prices to all-time highs,” he said.

Gold prices have not only recovered impressively in the past two weeks, but have also been supported by the US Federal Reserve (FED) maintaining its stance of keeping interest rates high for a long time. The FED Chairman still affirmed that he will bring inflation back to the target of 2%.

That stance has helped push long-term bond yields to fresh 16-year highs, with the 10-year note hitting 5% this week.

Some analysts note that the US Federal Reserve could lose control of the yield curve and be forced to buy bonds, which would benefit gold prices.

Ole Hansen, commodities expert at Saxo Bank, assessed that with geopolitical instability, gold has now become an economic safe haven.

Tavi Costa, investment strategist at Crescat Capital, posted on social media that the rise in gold prices to $2,000 could be a sign that gold investors are starting to expect some yield curve control measures from the Fed.

“The US government cannot continue to exponentially worsen its debt problem while the Fed deliberately increases the cost of solving the situation. We are facing a macroeconomic imbalance. Ultimately, financial repression must be restored,” he said.

However, not all analysts believe gold prices will rise in the long term.

Alex Kuptsikevich, senior market analyst at FxPro, noted that buying gold as a safe haven amid geopolitical tensions has never proven to be a sustainable solution. Escalating geopolitical uncertainty is not reflected in the bond or stock markets.

“Gold prices are currently rising against the current trend, and will lose momentum sooner or later. Gold is currently near the overbought zone, and is vulnerable to reversal under pressure from fundamental factors such as high bond yields and strong growth of the USD. The Russia-Ukraine conflict has caused gold prices to spike similarly, but then reverse,” the expert stated.

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